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tv   Mad Money  CNBC  December 3, 2012 11:00pm-12:00am EST

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and many areas are reporting their best tourism seasons in years. and bp's also committed to america. we support nearly 250,000 jobs and invest more here than anywhere else. we're working to fuel america for generations to come. our commitment has never been stronger. i'm jim cramer. welcome to my world. you need to get in the game. firms are going to go out of business and he's nuts! they're nuts! they know nothing! i always like to say there's a bull market somewhere. "mad money," you can't afford to miss it. >> hey, i'm cramer, welcome to "mad money." welcome to cramerica. other people want to make friends. i'm trying to save you money. my job is not just to entertain, but to teach. so call me at 1-800-743-cnbc. maybe it just doesn't matter, maybe the stock market stays buoyant because the fiscal cliff
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buoyant because the fiscal cliff buoyant because the fiscal cliff buoyant because the fiscal cliff buoyant because the fiscal cliff buoyant because the fiscal cliff buoyant because the fiscal cliff is not that big of an issue. maybe that's why the averages once again refuse to drop dramatically, the dow falling 60 points. despite the obvious impasse i saw firsthand when i appeared on "meet the press" with david gregory this weekend, i know i've been interpreting the market's relative success through a difficult period. success is defined by no huge hammering like we had during the debt ceiling crisis as a sign that either perhaps people didn't understand what awaits them -- no no! or that there might be a deal on the horizon to avoid the fiscal cliff, the fact that the republicans put out an offer, like their old offer before the president won re-election, it does feel like the two sides are talking, but they appear to be talking past each other. the clock is really ticking in washington. ticking against a deal. i think the two sides seem to
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hate each other more than ever. i don't now, it seems like the last 72 hours i was hoping it was going to get better and it seems like it got worse. i spent a ton of time this weekend hanging with old college chum grover norquist. he's as certain as ever that republicans who have impure thoughts about violating his no new tax pledge will be targeted at the primary level by tea party members. i'm taking this masterful behind-the-scenes player at his word that he controls almost all the republicans. because almost all of them signed his oath. so a deal could be tough. plus i'm now calling for no vacation without legislation. no vacation without legislation. because the holidays are slated to begin in a couple of weeks. which doesn't give enough time to get the job done. so you have one side that is insisting on tax increases and offering no spending cuts, and then you have the other side which has pledged no tax
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increases which assures no deal can occur. after all, even if the president offered heavy-duty spending cuts like he did during the debt ceiling fight, the republicans can't compromise because of their blood oath in norquist. they aren't allowed to and the president's line seems to have hardened. doesn't it seem to you like he thinks that the wealthy and those who own stocks are exactly the same? now as far as the public not knowing what awaits us, we got a whole new school springing up as represented by my friend doug kass, who writes on real money pro. doug told "the new york times" in a piece that led today's business section that one of the biggest stock market worries, the pain from higher capital gains and dividend taxes would barely have an impact on the market. because so few individuals have taxable accounts. only 14.7% down from 23.9%.
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doug's calling it a canard. and others say the job cuts for 2013, which seems to be put as many as two million to be made jobless won't be as fast or as high. plus the tax increase can be rolled back. in other words, a deal will eventually be reached, so why bother to sell. okay, so the "it's all overdone" crowd may have a role to play here. particularly because it turned out that when we got a deal to avert the debt ceiling back in the summer of 2011, we caught a gigantic rally. it was a mistake to sell. this is debt ceiling two. let me tell you where i come out. while nothing is irreparable when putting things back together if we go over the cliff, i'm getting worried about what will happen. certainly more than the school who says that the dire predictions are off the mark. i'm not waffling, it's just that the situation is dynamic, it changes every day. if you don't stay dynamic you're going to miss this.
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i'm giving you three reasons why i'm concerned. first if we have no deal when earning season kicks off, we've given ceos the ultimate reason to just slash their guidance horribly. what kind of ceo would express any confidence in this country if we don't get a deal? two million jobs lost, big increases in taxes, defense budget cut. host of tax incentives disappearing? does that make you optimistic? i think you sound like an idiot if you're optimistic. if i were a ceo who reports after the cliff jump, i would say i'm thinking about laying off people because of lack of demand. because the despite the more rosy prognosticators who are surfacing, there's too much data that shows we will go into a recession from the sudden and worrisome bout of washington-administered austerity. bad guidance equals lower prices.
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second, while there are many onerous elements, the ones that receive the least attention might be the worst of them. the possibility that 30 million americans will be thrown into this alternative minimum tax scheme. i don't pay it but boy, i don't like it. the amt is an arcane tax, unlike payroll tax withholding, won't be visible to those it has ensnared until the end of the year. it could cause the average taxpayer to pay an additional $3,000 when she least expects it. talk about a nightmare. finally i'm worried about the possibility that the new austerity becomes a permanent austerity. simply because the president believes his election means people voted for higher taxes for the wealthy. and the republicans believe they are off the hook because they took the grover norquist no new tax pledge. in that scenario, rising above, my pin means absolutely nothing. rise above what? the oath you gave to your voters? to these hardened partisans to rise above means rising above compromise.
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compromise is bad. right? i mean they think compromise is bad. they want to rise above it. they think it's a higher ground than not compromise. what's amazing to me is that when congress came up with this ridiculous cliff idea, there were legislators who believed that if these draconian changes were to become law, it would be so obvious we would be thrown into recession that it wouldn't happen. that fact was supposed to create compromise, instead, neither side seems at all fearful for recession. it's amazing how bold they are or maybe how stupid they are and to the gop, obama's re-election clearly meant nothing at all. it's almost as if neither side realizes how many people are simply just playing for dinner here, trying to put dinner on the table. now they got to deal with this morass in washington. while i'm optimistic if congress and the president cancel their vacations, remember, no vacation without legislation and stay to avert the cliff. i'm worried that they're sworn to not compromise. i'm worried that rising above is
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anathema to democrats and repugnant to the republicans as the phrase, grover, hide your ears, higher taxes. here's the bottom line. a new school which says the cliff jump won't be that bad has now entered the fray. i'm still hoping we don't go over the cliff. but i can't be sanguine if we do. i think it means that the stock market will get hammered even as it might bounce back if the austerity is lifted by a dreaded, hated compromise that both sides seem to despise. i have a list of ten stocks that would be the bounce-backers. you got to stay tuned for those. but it would be a bounce-back. let's go to isaac in pennsylvania. isaac? >> caller: jim, how are you today? >> i'm okay. how about you? >> caller: just fine. i have a question regarding dean foods. >> sure. >> caller: apparently they finally found a buyer for
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morningstar. which is going to add close to $1.5 billion, which they're going to use to pay down debt. obviously a very good thing. but they're losing morningstar and they do plan i believe to spin off the rest of rightway within a number of months. which kind of makes it a commodity stock you know, without the white wave or the morningstar. it's a dairy commodity stock. is it worth holding, given that? or is it worth holding to acquire the white wave spinoff? >> that's why you would hold it, is to acquire white wave. i think white wave is a great growth company. not unlike hain, i think dean foods without white wave is not so hot. i think you're spot-on in your analysis and i thank you for your call. let's go to art also from my home state of pennsylvania. art? >> caller: i'm a recovering eagles fan now living in steelers country. with everybody jumping on the
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chinese stock bandwagon i told you last week about keu 360 during the lightning round. it had that good quarter about three weeks ago. and no further news, today it hit a new 52-week high, we got a short squeeze going on here? >> yes, that's exactly what we have. i don't want you to touch it. sorry, i did have to momentarily wipe a tear from my eye, because whatever is going on with the eagles is just -- well, they went off their own sports cliff. let's just put it that way. it may seem like fiscal fears are subsiding, but you must still be a little cautious here. i'm optimistic for legislation if congress doesn't take a vacation, and until compromise is made, i'll try to spot some winners that are bounce-backers, if you stay with us, no vacation, congresspeople and president, until legislation. the new mantra. besides rise above.
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he's counting down the top stocks to play ahead of 2013. break out the party hats and stick around to find out how you can have yourself a very well see new year. and later, if the shoe fits? fashionable footwear maker deckers surged on the street today. the stock is still well off its highs but is today's move your signal to slip back into its shares? kremer is trying it on for size, just ahead, all coming up on that money. >> don't miss a second of mad money. followed jim kramer on twitter. have a question, tweet kramer hashtag mad tweet. send g-men e-mail to mad money
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at sea nbc got, or give us a call at 1-800-743-c nbc. miss something? had to mad money got see
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novelty is overrated. at least when you're managing your own money. you don't need to constantly come up with new ideas. in fact rather than searching for new ideas to own, i find it's better to circle back like a portfolio manager to rate and review and scrutinize, whether the story is still on track with your old ideas, why you picked them in the first place. that's why i'm telling to you to keep up with your homework. i would love it if you could spend an hour on a position a week. i know that's somewhat unrealistic. you've got to stay on it. you've got to make sure that your stocks are still worth owning. at the beginning of the fourth quarter during the week of october 8th, i put together a list of if you can't beat 'em, join 'em stocks. the idea being the end of the fourth quarter, growth-oriented money managers look at their best performers and they double down on them going into the end of the year. i recommended amazon, google, mastercard, visa, ulta salon,
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tractor supply, sherwin williams, gilead, diageo and alexion as my top ten which i thought would outperform the rest of the market through the end of the year. now that the new year is only a month away, we got to go over them again. it's time to review how the stocks have held up and whether some of them or one of them don't belong. in the past two months, well let's just say it's been a rough period for the market as a whole. i recommended these ten stocks the s&p was at 1455. since then the s&p has swung down to 1355. right before the thanksgiving holiday. before rebounding back up to 1413. still, it's down about 3% from where i first started recommending these. we have been whipsawing up and down, based on fears about fiscal cliff, and hopes that we might get a possible deal to bridge the fiscal cliff in washington. but through the period these ten growth stocks have held up surprisingly well. i say surprising, because these stocks all had huge gains going
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into the fourth quarter. and with the fiscal cliff looming, many investors have been selling their biggest winners to take advantage of the current low capital gains tax rates that will likely go away come january. if we get a positive resolution caught to the fiscal cliff, you'll want to buy these stocks hand over fist. because then they'll really be able to roar. how have the anointed names done? >> amazon started at 259, pulled back to 220 before rebounding to 250, where it is right now. google has been pounded. it went from over 760 to below 660, but it's rebounded to 695. mastercard and visa, they took 25-point dives. i told to you buy them into weakness. falling from 475 to 450, and rallied to 487. these are great ones to buy now. a dozen points where above where i recommended. that's a win. visa has moved up nicely from
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136 to 149. ulta salon, 136 to 149. tractor supply fell 98, from 98 to 89. sherman williams has moved up from 149 to 152. and diageo, taking the country and the world by storm, 113 to 120. gilead shod up from 168 to 175. alexion, meat grinder time. 111 down to 95. let's take a look at the five, first five anointed names, go over the remainder after the break. remember, we're reviewing to see if they're still worth buying on weakness, that may be caused by the cliff. let's start with amazon. amazon sold off and then rebounded with a vengeance. the stock pulled back going into the quarter because it was coming off a big run. but when the company reported october 25th, the market gave amazon the benefit of the doubt, and it's been coming back ever since. amazon still has the same terrific story, it's a company with tremendous growth that's benefitting from the switch to online shopping. amazon controls 20% of all
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e-commerce in america, but it's just scratching the surface, only accounts for about 1% of total retail sales. these guys are taking share and taking names and amazon so far, we've seen strong data from sales on black friday as well as cyber monday. plus the company keeps expanding its hardware ecosystem with new versions of the kindle which encourages people to buy their e-books and music and videos through amazon. trying to digitize the online shopping business and this one is really not done. i think it goes higher, particularly because of sandy, shut-in, buy. how about google? google got crushed after it reported disappointing quarter. the culprit? people switching from desktop to mobile. as google makes less money on mobile advertisers. nevertheless, google has been coming back as the company is still the sultan of search, a business still growing in the high teens.
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we've seen how quickly facebook was able to adapt to the new mobile advertising environment, once google has seen that rocketship, i see no reason why google should be any different. especially since google owns android, the largest mobile operating system. they need to figure out how to monetize it better. something the company is doing by releasing its own line of smartphones and tablets. the nexus phone is sold out until after christmas. of the growth stocks, i got to admit i like google less than i did before the bad quarter. if you're trying to figure out which of these stocks worries me the most, it's google, because it's become a show-me situation. how about visa and master card? both up decently since i recommended them in october. these are both plays in the worldwide switch from paper currency to plastic. visa and mastercard both reported strong quarters in october. they have healthy balance sheets. mastercard is winning new business all over the place. visa announced a $1.5 billion buyback.
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even though visa has a new ceo, i'm a big fan of both stocks. i think they're both candidates to offer special dividends as the year unwinds. they've got the cash for certain. then there's this sherwin williams. the stock sold off on news of a good quarter. sherwin williams was a victim of great expectations. the stock has come back since this because this paint-maker is a terrific player in the housing rebound. that theme seems to be almost unstoppable. three weeks ago, sherwin williams agreed to acquire co-mex, a mexican-based paint company. meanwhile, as business gets better, the company's outlook on raw materials inflation is moderated, something that will be a boon for sherwin williams margins next year. they open up enough plants that it's not going to hire any more. this one is better than ever,
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particularly when you consider how much damage sandy has done and how much square footage must be repainted because of that horrible storm. okay, here's the bottom line, you don't have to keep searching for new ideas. as long as the old ones work just fine. that's why if we get an agreement with the fiscal cliff, i would be a buyer of amazon, visa, mastercard and sherwin williams. i'm lukewarm on google. stick around for my update on the five remaining anointed growth stocks. coming up, if the shoe fits, deckers surged on the street today. the stock is still well off its highs, but is today's move your signal to slip back into its shares? cramer is trying it on for size.
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the key to being a good investor is not constantly having to come up with new ideas, some sort of weird treadmill or maybe one of those elliptical things. new stock picks although it doesn't hurt to find them, aren't as good sometimes as going back to the tried and true. what's far more important is remembering to re-evaluate and reexamine your old ideas. make sure they're still current. make sure that something hasn't changed that makes us so they're not as advantageous, not as special. tonight we're reviewing ten growth stocks i highlighted at the beginning of october. i said these were the stocks to buy for the fourth quarter on any dip because they would be
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anointed by mutual fund managers and they would come in and buoy them if they went down. meaning the big boys would be accumulating more shares through the end of the year. since then we've been hit with a devastating hurricane and even worse, the market has woken up to the dangers of the looming fiscal cliff which could send us into a recession next year if the politicians in washington don't rise above and get their act together. so in light of this new environment, we want to see whether my anointed growth stocks hold up. are the fundamentals still okay? i went over amazon, google, mastercard, visa and sherwin williams. i don't like google as much. now five more names to review and reexamine. next up is ulta salon. they got hit in mid october when the chief financial officer announced his sudden resignation. we never like that when the cfo resigns. that could be a sign that something could be really wrong with the financials. given that this particular cfo
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had been there less than two months, it probably was the case of him being the wrong guy for the job. last thursday ulta went on to report a terrific quarter. and the stock shot up seven points in the news. management indicated they're seeing a strong start to the holiday shopping season. the real story with ulta, and the reason it's been such a fabulous stock -- is that the company is growing like a weed, expanding all over america. they have 537 locations, ultimately they plan to double that. next year alone the company intends to open 125 new stores. that's tremendous growth. ulta, it seems very much intact. i think it's a buy if we get a fiscal cliff deal and it might even be a buy if we blow through the january 1st deadline, go over the cliff and get a huge marketwide selloff. giving you a phenomenal entry point in this stock and many others when it gets closer to doubling the store count. we'll get closer to leaving ulta. that's not in the cards right now. then there's tractor supply. sort of a rural farm and ranch-oriented version of home depot. i admit it, i blew it with this one.
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i recommended the stock at $98, about $10 above where it is right now. what went wrong? expectations got too high, so high that when tractor supply reported a beat and raise on october 24th, it wasn't good enough to prevent the stock from going lower. now that the expectations have been adjusted downward, i think tractor supply makes a lot more sense. even though many people considered the quarter disappointing, i actually thought it was impressive considering that tractor supply was up against tough comparisons. plus this company still taking market share in a fragmented industry. it is still growing and its store base should get a boost from the turn in housing, a new bull market. and tractor supply benefits from extreme temperatures and extreme weather. something we didn't have when we last reported. but we now have courtesy of sandy. that said, i said i blew it. home depot is better. home depot is looking like a lot better bet than tractor supply. now let's go over the biotechs, gilead and alexia.
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gilead has given you a nice 8% rally. i think it's got more room to run. they're number one maker of hiv drugs and developing a new treatment for hepatitis c that has potential to be a megablockbuster. gilead was the darling of the american association for the study of liver disease and the company reported positive results from the late-stage studies of its hep c pill which could be approved by the fda next year. plus gilead has a deep pipeline including a new cancer drug. this story playing out just as we thought. best of all, gilead, i'm calling this one immune to the fiscal cliff-induced recession. people do not stop taking life-saving medicines just because the economy slows down. alexeon, on the other hand, no. not so hot. the stock has tripled since i first got behind it it's down about 14% since i highlighted it as an anointed growth stock two months ago. that's unacceptable.
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alexeon is a orphan drug maker whose lead drug has been incredibly successful. however, even though alxn raised guidance, not unlike tractor supply, the stock sold off because the sales only met expectations rather than beating them given the huge run in the stock going to the quarter. alxn had to do more than just meet the expectations. they had to beat that and crush them. and this time around, it got crushed. that said, to me the market overreacted. alexia has received fda approval to use solera for new indication that could be worth $900 million in peak sales and another $2.5 billion worth of new indications that the company is working on just for this one medication. plus they have intriguing things in the pipe. although they're still in the early stages of development, so don't look for them to produce numbers yet. my view is that the street modeled the quarter wrong and punished the stock, what we should be focused on is the company's future prospects. especially that the stock is so much cheaper, wouldn't life have
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been easier if i picked celgene instead? last but not least, best for last, diageo, up 4% since i recommended it. you know it if from its brands, johnnie walker, smirnoff, captain morgan, jose cuervo, tanqueray, bailey's irish cream and guinness. don't drink them all together. a master brand and growth all over the world and a solid 2.8% yield. everything is going diageo's way and their interim financial update, 5% growth. i say you can stick with diageo. here's the bottom line. looking back at our anointed stocks for the fourth quarter, ulta salon, gilead and diageo, they still got it, okay. tractor supply and alexeon, slammed at these levels, i think they could be more attractive. although i think home depot and celgene probably outperform
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these two. i would keep all five on your shopping list in case we get a fiscal cliff deal or we go over the deadline and get a huge fiscal cliff-induced selloff. i thinks these stocks bounce hard, and bounce first, when the smoke clears from the cliff jump. let's go to logan in texas. >> caller: my question is, there's been a lot of talk about 3-d printers and 3-d systems and stratus, and i'm curious what you think of the industry, and stratus has had a merger today, and they had a big selloff. what do you see specifically with their future? >> ted, my research assistant and i have been going over this. we decided we have to do a full-blown piece on it. it comes up too much and it sounds too interesting. we talked about it this morning. are you listening in my office? i felt it was not right until i had done more work on this, to really say it was good or not. it's not an easy story to know. let's go to phillip in arizona,
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phillip? >> caller: hi, jim, greetings from sunny tucson, arizona, thank you for having me on the show and for all the great books you've written. i've read almost all of them. the stock i have for you is cbg, convergys, they've been cleaning house and selling off underperforming divisions. they've instituted their first dividend this year, they're paying out of operations, buying back shares at roughly $15 a share. operations are strong, beating on revenues, beating on earnings, raising guidance, looking at about $1 eps moving forward. where does it go from here? >> this is a stock i really like. i do not understand why this company is still public. i can't understand why someone hasn't acquired them. it's a great outsourcer, i think it would be -- most companies that are in this space of customer management have been bought. i think these guys, because the fundamentals are good, you can
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own it and if they get a bid -- josh in california. josh? >> caller: all right, mr. cramer, how are you today? >> how about you, josh, what's going on? >> caller: let's do three kickers real quick. cxw, smith and wesson, swhc and ruger, rjr. how they correlate with the upcoming new administration, existing administration. >> i'm not going to put corrections, it's a contract company. it depends on what states are doing what. i have said among sturm, among smith and wesson and among cabela's, i lump that in, the one i like best is cabela's. yes, pistol. if it ain't broke, don't fix it. i'm a little cautious with google, okay. these momentum stocks still work. amazon, visa, mastercard, sherwin williams, ulta, gilead, diageo and then we are going to be a little more pricey on
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tractor supply and alexia, but they all belong on a year-end shopping list and they can bounce, and bounce hard if we jump over the cliff. bp has paid over twenty-threebp billion dollarsnt to the gulf. to help those affected and to cover cleanup costs.
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it is time. it is time for the lightning round. and now -- but look, these are the quotes of scores that's the eagles losing. and wow, are you ready, ski daddy? lightning round. let's go to nick in indiana.
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nick? >> caller: first-time caller, it's an honor. >> an honor to have you. >> caller: atlantic power missed revenue and earnings expectations last quarter. what do you think of this? >> what's going on, i got to get everything going right. i need a dominion, con ed, i need a duke. duke says that the man wasn't forced out. i got to tell you, i don't care, i like duke. let's go to glenn in new york. glenn? >> caller: ski daddy, my stock is apple. >> i think you're fine with apple. i think there's a fantastic piece in the "washington post" yesterday, i urge you to get it in the business sector. talks about the five myths of apple and why the stock could go higher and i agree. let's go to ellis in new york, ellis? >> caller: wondering your thoughts on pharma, atrs. >> this thing has doubled. it's a needle stock. we have not had good luck recommending needle stocks.
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i'm not going to go for it. joey in colorado, joey? >> caller: hello. booyah jim cramer. how about lynn energy, buy, sell or hold? >> linn energy is terrific. let's go to jude in my home state of new jersey. >> caller: how are you? >> okay. >> caller: what do you think of american eagle outfitters? >> take the money and run. you got a good one and now you can go. that's a hard business, that apparel business. i need to go to mary in new york. >> caller: i'm wondering about knight capital. >> i think limited upside. i think that tommy joyce, the ceo has done a remarkable job. helen in illinois, helen? >> caller: yeah, jim, hi. i would like to know what's your opinion of frontier communication. >> nothing but pain ahead on
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that one. i do not want you to buy it. and a nice run, a good chance to go. let's go to bill in alabama. bill? >> caller: jim, roll tide to you. dividend producing stock, sand ridge, mississippi. >> i like the sand ridge, mississippi, know it's got an outsized yield. that means it could be susceptible to being cut. the dividend could be susceptible to being cut. it will still be good because they have good assets behind it. sand ridge, too speculative for this guy. and that, ladies and gentlemen, is the conclusion of the lightning round! >> the lightning round is sponsored by td ameritrade.
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as the holiday season approaches, there's one stock that's been pretty naughty in 2012. but after a big move today, it may end up on the nice list. i'm talking about deckers. here's a company, the maker of uggs boots and teva sandals, that's been one of the hottest footwear stocks of the last decade. but then over the past year that business hit a wall. stock just imploded. deckers, which had been one of our favorite growth stocks for ages, fell off the ugly tree and hit every branch on the way down. stock beat 117 a year ago, since then it went down practically in a straight line. it finally bottomed at $28 and change near the end of october. deckers -- left for dead. became a hated stock, a gift for for short-sellers who made big money betting against it on the way down. everybody assumed that uggs had gone out of style. nobody believed in deckers.
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now the stock is absolutely roaring. up $4.05, or 10.6% today alone, courtesy of a major upgrade from the shoe axe they call it, stern ag. not just this one upgrade, deckers has been gradually working higher for the last month. with the stock now at $42. up 14 points from its late october lows. what happened? how have they managed to come back from the dead? after a year where they couldn't do anything right, we're getting signs that the fundamentals could be on the mend. you have to understand how much went wrong here. until a year ago, they were seen as a secular growth story. it could transcend any short-term issues with the economy. but last year, we had a warm winter and sales of uggs were crushed by the weather. deckers were forced to raise prices drastically because of sheepskin. higher prices, lower sales. quarter after quarter things got worse. when deckers reported latest results on october 25th, the
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trends were horrid. the stock pole-axed. there was one bright spot. management indicated that sheepskin prices have been falling, which should mean the horrific declines in deckers' gross margins, what they make after the cost of sales, are at an end with the possibility of margin expansion as we head into the new year. now, ever since the stock got pummeled after the latest quarter, deckers has been coming back with a vengeance, but it's not because of better gross margins. what's the real reason for this rally? deckers has reached a point where the expectations got so low and the stock became so hated, there was nowhere left for it to go but up. half the float has been sold short. that's insane, insanely high number given what we know could be a better 2013. the shorts failed to understand is that deckers is not some ridiculous flash in the footwear pan. it's a real company, real sales, real earnings, that means it has
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to be worth something to a potential acquirer. now lately there's been lot of chatter about how deckers could get taken over. it's something we've talked about on "mad money." the stock has rallied on takeover speculation. one problem with this thesis. i have a hard and fast rule that we never speculate on takeovers in situations where the fundamentals are deteriorating. in part that's because no company wants to buy a business that seems to be falling apart. they're falling apart. let me scoop in there and buy them. if you get signs that the fundamentals are improving, even for a company like sprint, a takeover becomes a whole lot more plausible. that's what this move up in deckers today was off the stern ag upgrade. the analysts who cover the stock have a terrific record. on this particular stock they were incredibly critical of deckers last december when it was high. they rated the stock an underperform and upgraded it to neutral when the stock bottomed the day after it reported the most recent quarter and now they're saying buy.
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ordinarily this upgrade wouldn't cause a rally. the analysts being very bullish about a turn in the second half of next year, they see a positive reception for uggs in the fall of 2013, thanks to new line extensions. let's hope it's not these. lower prices and new styles that retailers seem to like. and if fundamentals at deckers are about do get better, that means it's not insane to start speculating on a possible takeover. who might be willing to acquire deckers? i can think of a number of possible suitors, deckers has a $1.4 billion in sales and $1.45 billion market cap. that puts it in the takeover sweet spot. i can see a private equity firm swooping in to take the company private. i think the most likely acquirer is our friend, vf corp. parent company of north face. why vfc? this is a huge apparel outfit that has a history of making big acquisitions focused in the outdoors. they bought another stock we
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liked very much, timberland. another boot company for $2 billion. that's been incredibly successful deal. i think uggs and teva, deckers two key brands, would fit in perfectly. now vf corp bought timberland at a 25% premium. they're willing it pay the same for deckers, i could see the company being bought for $50 a share. i think that might be a lowball number. i think you ought to put half a position into this. not a deal opening tomorrow, maybe midday, because even though the stock has had a big run, i don't know if it's going to come back to the levels of the 30s any more. it may be a fiscal cliff. it's only trading 11 times next year's numbers and we care where a stock is going, not where it's coming from. wait for the pull-back in the second half and then you put in your other half of the position. bottom line, dickers has come back from the dead. because now the fundamentals seem like they could be turning. the idea that the company could catch a takeover bid from somebody like vf corp seems more plausible by the day.
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half a position now and wait for deckers to come in before you buy any more. this stock will go down on a fiscal cliff situation. that might be the chance to buy the rest. "mad money" is back after the break.
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every now and then a piece research comes along and blows your mind. forces you to reexamine assumptions you thought were etched in stone. that's how i feel about today's
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incredible goldman sachs upgrade of dell. not from hold to buy. but from sell to buy. initially i dismissed this piece, written by old hand bill shoep as sophistry. i was reacting to the headline report of the change of recommendation. what makes me so intrigued now? first there's nothing like being right and boy has he been right about this one. he took dell to a sell two years ago. stock dropped 31% versus a 14% gain in the s&p 500. if that doesn't grab your attention, i don't know what will. second he's not making outrageous claims with the upgrade, the stock was at $9 when he made the call and he's using a $13 target. shoep has been very much against investing in the deep-value hardware plays, and he's felt that forever. he's been all over the shift in mobility and cloud computing. shoep fears he is consensus now. put simply, everyone is negative and has written off dell
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simultaneously at precisely the moment when the company is brimming with cash, and that cash gives the stock a nice floor, plus the possibility of a leveraged buy-out. if it goes any lower, because the ceo, michael dell, who owns 14% of the company and frustration with the current stock market, let's say with the price of his own stock. they make a deal, now this is another quote from shoep, difficult to completely dismiss. that's the language he uses. in other words, the idea that dell might take this private is difficult to dismiss. shoep caveats his upgrade well. pc demand in pricing becomes weaker than he thinks and looking for aggressive price cutting, it could be a weak call. dell might be challenged to do well, given that dell has tried to move into bigger, more cloud-friendly server offerings. maybe the company does something big with its cash which would make a deal, a leveraged buy-out impossible.
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for me, dell as well as fellow pc traveler hewlett-packard are in secular and cyclical decline. i'm a believer that the tablet, the ipad is the true enemy of the pc, and will take share even as shoep talks about they're very different markets and not the true competition that i think they are. given that shoep refreshes us with stories from a couple of years ago and many points ago for dell was much higher than michael dell discussed going private with the media and everyone is negative at the same time, i think it's possible that shoep could be right. i don't think dell's fundamentals are on firm footing. this is compelling research and those who want to speculate on something happening at dell should now feel free to do so. stick with cramer. [ male announcer ] this december, remember --
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